The 4th of July is one of my favorite holidays. Celebrating it makes me think of family cookouts, playing golf, swimming, and belting out “God Bless the U.S.A.” in my basement karaoke bar. The freedom to do all of those things are some of the reasons I am so thankful to live in this country. Hopefully you are reading this after spending a relaxing long weekend with your loved ones whether or not it involved singing the Lee Greenwood classic. We are now past the halfway point in 2017 and we have seen some good progress overall in the financial markets. I hate to be a downer, but it is also a good time to remind all of us that at some point we will see volatility creep back into the market. It is a good time to reflect on what we have seen over the past eight years.
The following information is from Investor’s Business Daily. “Over the past eight years (2009-2016), the stock market has suffered a pullback that bottomed in the summer each year (though it didn't necessarily start in the summer). For summer, we used the official designation: usually June 21 to Sept. 21 or 22. Let's look at the summer lows through the lens of the Nasdaq.
In 2016, the summer low came early, June 27, and represented an 8.2% pullback from the previous high.
In 2015, the summer nadir arrived Aug. 24. The pullback was 18%, thanks to the flash crash.
In 2014, the summer low was pegged Aug. 7. The pullback could barely be called a pullback — down 3.6%.
In 2013, the summer low came early, June 24. The pullback was 6.7%.
In 2012, the summer low also was early, June 28. The pullback was 10.1%.
In 2011, the summer low appeared Aug. 9. The pullback was 19%.
In 2010, the summer low was on July 1. The pullback was 18.7%.
In 2009, the summer low rolled in July 8. The pullback was 8.1%.
The median pullback in these eight years was 8% to 10%. The average pullback was 11.5%.”
This information is a good reminder that corrections (a decline of 10% or more) happen almost every year. During times of volatility a good advisor will monitor your portfolio holdings and communicate what is going on within the financial markets and your portfolio. Times like that can be scary over several months, but it helps to know if you are on track for your long term goals by having a diversified portfolio that is designed to weather normal volatility. The financial plans we monitor for our clients have a feature called “what are you afraid of?” that allows you to see the effects of a market downturn on your long-term goals. If you have any questions for your individual plan or to see if you are on track, visit www.econwealth.com.